According to Bloomberg Markets, major U.S. banks entered the July 2026 earnings season with strong positioning, buoyed by sustained net interest margins and resilient loan books. At almost the same moment, Bloomberg Markets reported warnings from U.S. Representative Greg Stanton that a closure of the Strait of Hormuz — through which a substantial share of global oil supply passes — would deliver a serious shock to an already stretched global economy. The juxtaposition is instructive: headline bank profitability looks reassuring, but the system underneath it was built on a credit architecture that has never been fully unwound from its Everything Bubble origins.
The credit expansion that followed was not confined to mortgage lending, as in 2004–2007. It spread across corporate bonds, leveraged loans, private credit, sovereign debt, and consumer lending simultaneously — which is precisely what distinguishes the Everything Bubble from its predecessors. When every asset class inflates together, the margin and credit structures underpinning each market become mutually reinforcing. A stress event in one corner — say, a Strait of Hormuz closure that spikes oil prices, compresses consumer discretionary spending, and widens corporate credit spreads — can transmit through the entire architecture faster than any single-sector model predicts.
The Anatomy of the Credit Machine
To understand why current bank earnings should be read with caution, it helps to reconstruct how the Everything Bubble's credit machine actually operated. The mechanism had four interlocking layers.
Third, margin debt and retail participation. When professional investors were forced into riskier assets, retail investors followed — often using margin. U.S. margin debt tracked by FINRA reached record nominal levels multiple times during the 2010s and surged again in 2020–2021. Margin debt is the most direct measure of financial system fragility: it amplifies gains in rising markets and forces liquidations in falling ones, creating the feedback loops that turn corrections into crashes.
The macro context for this historical episode is one of incomplete normalisation. Interest rates rose, but asset prices — in aggregate — did not fall to levels consistent with those rates. That gap between rate levels and asset valuations is the unresolved tension at the centre of current market conditions. Read the full The Everything Bubble (2009-2022) entry in the Bubblepedia Encyclopedia for a comprehensive account of how each asset class inflated and began to deflate.
Hormuz as a Stress Test for Incomplete Deleveraging
The Hormuz warning matters in this context not because an oil supply shock is itself a financial bubble event, but because it illustrates how external shocks interact with credit architecture. A sustained oil price spike would push inflation higher, constrain central bank rate-cutting capacity, widen corporate credit spreads — particularly for energy-intensive sectors — and compress consumer balance sheets. Each of those effects would stress the credit structures built during the Everything Bubble years that have not yet been fully repriced.
The financial system's exposure to geopolitical supply shocks is a direct function of how much margin and credit was extended during the low-rate era. The more incomplete the deleveraging, the larger the transmission. — paraphrased from current market risk analysis
Meanwhile, Bloomberg Markets has separately examined how founder-controlled dual-class share structures are concentrating voting power in public markets — a governance dynamic that echoes the late stages of prior bubble periods, when capital allocation decisions became increasingly concentrated in the hands of a small number of actors insulated from normal market discipline.
Has the Everything Bubble Deflated or Shape-Shifted?
The honest answer is: both, depending on the asset class. Crypto and long-duration bonds experienced genuine, painful deflation in 2022. Commercial real estate in major office markets has continued to deflate slowly. But equities — particularly large-cap U.S. technology — have reinflated around a new narrative (artificial intelligence) that has attracted the same pattern of multiple expansion and momentum-driven inflows that characterised the final phase of the Everything Bubble itself. For a direct comparison of how infrastructure enthusiasm drives valuation disconnects across technology cycles, see Dot-Com Bubble vs. AI Infrastructure 2024.
The credit architecture that made the Everything Bubble possible — sovereign debt as the repriced anchor, compressed spreads across the risk spectrum, elevated margin debt, and property values as the collateral base — has not been dismantled. It has been partially stressed and partially repriced. That is a different thing from resolution. Investors reading strong bank earnings headlines this week should hold both facts in mind simultaneously. You can find current bubble risk indicators across asset classes at Bubblepedia's Bubble Watch.